Why Bitcoin Has a Volatile Value
FACEBOOK
TWITTER
LINKEDIN
By NATHAN REIFF
Reviewed By SOMER ANDERSON
Updated Jun 16, 2020
TABLE OF CONTENTS
Bad News Hurts Adoption Rate
Bitcoin's Perceived Value Sways
Uncertainty of Future Value
Large Currency Holder Risks
Security Breaches Cause Volatility
High-Profile Losses Raise Fear
High-Inflation and Bitcoins
Tax Treatment Lifts Volatility
Price fluctuations in the bitcoin spot rate on cryptocurrency exchanges are driven by many factors. Volatility is measured in traditional markets by the Volatility Index, also known as the CBOE Volatility Index (VIX). More recently, a volatility index for bitcoin has also become available. Known as the Bitcoin Volatility Index, it aims to track the volatility of the world's leading digital currency by market cap over various periods of time.1
Bitcoin's value has been historically quite volatile. In a three-month span from October of 2017 to January of 2018, for instance, the volatility of the price of bitcoin reached to nearly 8%. This is more than twice the volatility of bitcoin in the 30-day period ending January 15, 2020.1 But why is bitcoin so volatile? Here are just a few of the many factors behind bitcoin's volatility.
Bad News Hurts Adoption Rate
News events that scare bitcoin users include geopolitical events and statements by governments that bitcoin is likely to be regulated. Bitcoin's early adopters included several bad actors, producing headline news stories that produced fear in investors.
Headline-making bitcoin news over the decade or so of the cryptocurrency's existence includes the bankruptcy of Mt. Gox in early 2014 and, more recently, that of the South Korean exchange Yapian Youbit. Other news stories which shocked investors include the high-profile use of bitcoin in drug transactions via Silk Road that ended with the FBI shutdown of the marketplace in October 2013.2
All these incidents and the public panic that ensued drove the value of bitcoins versus fiat currencies down rapidly. However, bitcoin-friendly investors viewed those events as evidence that the market was maturing, driving the value of bitcoins versus the dollar markedly back up in the short period immediately following the news events.
Bitcoin's Perceived Value Sways
One reason why bitcoin may fluctuate against fiat currencies is the perceived store of value versus the fiat currency. Bitcoin has properties that make it similar to gold. It is governed by a design decision by the developers of the core technology to limit its production to a fixed quantity of 21 million BTC.
Since that differs markedly from fiat currency, which is dynamically managed by governments who want to maintain low inflation, high employment, and satisfactory growth through investment in capital resources, as economies built with fiat currencies show signs of strength or weakness, investors may allocate more or less of their assets into bitcoin.
Uncertainty of Future Bitcoin's Value
Bitcoin volatility is also driven in large part by varying perceptions of the intrinsic value of the cryptocurrency as a store of value and method of value transfer. A store of value is the function by which an asset can be useful in the future with some predictability. A store of value can be saved and exchanged for some good or service in the future.
A method of value transfer is any object or concept used to transmit property in the form of assets from one party to another. Bitcoin’s volatility at the present makes it a somewhat unclear store of value, but it promises nearly frictionless value transfer. As a result, we see that bitcoin's value can swing based on news events much as we observe with fiat currencies.
Large Currency Holder Risks
Bitcoin volatility is also to an extent driven by holders of large proportions of the total outstanding float of the currency. For bitcoin investors with current holdings above around $10M, it is not clear how they would liquidate a position that large into a fiat position without severely moving the market. Indeed, it may not be clear how they would liquidate a position of that size in a short period of time at all, as most cryptocurrency exchanges impose 24-hour withdrawal limits far below that threshold.
Bitcoin has not reached the mass market adoption rates that would be necessary to provide option value to large holders of the currency.
Security Breaches Cause Volatility
Bitcoin can also become volatile when the bitcoin community exposes security vulnerabilities in an effort to produce massive open source responses in the form of security fixes. This approach to security is paradoxically one that produces great outcomes, with many valuable open source software initiatives to its credit, including Linux. Bitcoin developers must reveal security concerns to the public in order to produce robust solutions.
It was a hack that drove the Yapian Youbit to bankruptcy, while many other cryptocurrencies have also made headlines for being hacked or having stashes of cryptocurrencies stolen. As an early example, in April 2014, the OpenSSL vulnerabilities attacked by the Heartbleed bug and reported by Google security's, Neel Mehta, drove Bitcoin prices down by 10% in a month.
Bitcoin and open source software development are built upon the same fundamental premise that a copy of the source code is available to users to examine. This concept makes it the responsibility of the community to voice concerns about the software design, just as it is the responsibility of the community to come to consensus about modifications to that underlying source code as well. Because of the open conversation and debate regarding the Bitcoin network, security breaches tend to be highly publicized.
High-Profile Losses Raise Fear
It is worth noting that the aforementioned thefts and the ensuing news about the losses had a double effect on volatility. They reduced the overall float of bitcoin, producing a potential lift on the value of the remaining bitcoin due to increased scarcity. However, overriding this lift was the negative effect of the news cycle that followed.
Notably, other bitcoin gateways looked to the massive failure at Mt. Gox as a positive for the long term prospects of bitcoin, further complicating the already complex story behind the currency’s volatility. As early adopting firms were eliminated from the market due to poor management and dysfunctional processes, later entrants learn from their errors and build stronger processes into their own operations, strengthening the infrastructure of the cryptocurrency overall.
High-Inflation Nations and Bitcoins
Bitcoin’s use case as a currency for developing countries that are currently experiencing high inflation is valuable when considering the volatility of bitcoin in these economies versus the volatility of bitcoin in USD. Bitcoin is much more volatile versus USD than the high-inflation Argentine peso versus the USD.
That being said, the near frictionless transfer of bitcoins across borders makes it a potentially highly attractive borrowing instrument for Argentineans, as the high inflation rate for peso-denominated loans potentially justifies taking on some intermediate currency volatility risk in a bitcoin-denominated loan funded outside Argentina.
Similarly, funders outside Argentina can earn a higher return under this scheme than they can by using other debt instruments, denominated in their home currency, potentially offsetting some of the risks of exposure to the high inflation Argentine market.
Tax Treatment Lifts Volatility
According to the Internal Revenue Service (IRS), bitcoin is actually considered an asset for tax purposes.3 This has had a mixed impact on bitcoin's volatility. On the upside, any statement recognizing the currency has a positive effect on the market valuation of the currency.
Conversely, the decision by the IRS to call it property had at least two negative effects. The first was the added complexity for users who want to use it as a form of payment. Under the new tax law, users would have to record the market value of the currency at the time of every transaction, no matter how small. This need for record keeping can understandably slow adoption as it seems to be too much trouble for what it is worth for many users.
Secondly, the decision to call the currency a form of property for tax purposes may be a signal to some market participants that the IRS is preparing to enforce stronger regulations later. Very strong regulation of the currency could cause the adoption rate of the currency to slow to the point where it is not able to achieve the mass adoption that is critical for its overall utility in society. Recent moves by the IRS are not clear as to their signaling motives and therefore have mixed signals to the market for bitcoin.
monero calc 00000000ffff0000000000000000000000000000000000000000000000000000android tether
bitcoin alien
bitcoin adress bitcoin icons bitcoin vip
facebook bitcoin cryptocurrency logo bitcoin 3 ethereum crane bitcoin mercado bitcoin balance bitcoin location p2pool ethereum bitcoin neteller bitcoin withdraw bitcoin rpg фарм bitcoin pow bitcoin bitcoin ukraine
bitcoin зарегистрироваться invest bitcoin ethereum контракт bitcoin xl local ethereum bitcoin rub bitcoin analysis
bitcoin окупаемость bitcoin betting bitcoin fund
bitcoin make калькулятор monero цена ethereum bitcoin main развод bitcoin bitcoin казахстан coffee bitcoin platinum bitcoin
putin bitcoin разработчик bitcoin webmoney bitcoin трейдинг bitcoin баланс bitcoin investment bitcoin fire bitcoin
майнинг monero foto bitcoin bitcoin руб
trinity bitcoin bitcoin super elena bitcoin etoro bitcoin bitcoin goldmine история ethereum капитализация bitcoin bitcoin wsj bitcoin half bitcoin paypal bitcoin euro ethereum доллар • $1 trillion annual e-commerce marketкредит bitcoin bag bitcoin вики bitcoin валюты bitcoin bitcoin red bitcoin de почему bitcoin account bitcoin проект bitcoin spin bitcoin bitcoin карта доходность ethereum nonce bitcoin mine ethereum кран ethereum ethereum кран ethereum ubuntu bitcoin land bitcoin cap tether coin
инвестирование bitcoin ethereum txid bitcoin рублей bitcoin баланс ethereum платформа difficulty bitcoin bitcoin cnbc coinmarketcap bitcoin bitcoin автоматический bitcoin darkcoin bitcoin 3 bitcoin ocean криптовалюта tether email bitcoin rush bitcoin tether приложение ротатор bitcoin ethereum пулы bitcoin sec secp256k1 ethereum talk bitcoin bitcoin instagram moto bitcoin пул bitcoin bitcoin основатель mindgate bitcoin dorks bitcoin bitcoin crane bitcoin friday bitcoin пулы
click bitcoin bitcoin pizza bitcoin видеокарты bitcoin com торги bitcoin bitcoin weekend команды bitcoin bitcoin froggy nem cryptocurrency bitcoin проблемы bitcoin capital bitcoin banking bitcoin token
konvert bitcoin криптовалюта tether ethereum купить monero bitcointalk average bitcoin bitcoin fpga segwit2x bitcoin bitcoin checker купить tether bitcoin symbol казино ethereum byzantium ethereum ubuntu bitcoin
bitcoin froggy bitcoin xl bitcoin команды bitcoin p2p sun bitcoin lurkmore bitcoin
bitcoin динамика bitcoin artikel
bitcoin eu bitcoin reddit china bitcoin bitcoin рынок bitcoin fox ethereum asic cpa bitcoin top bitcoin ethereum forks cryptocurrency nem bitcoin автосерфинг bitcoin payeer matteo monero
bitcoin ethereum bitcoin 1000 goldsday bitcoin bitcoin services капитализация bitcoin cryptocurrency bitcoin завести картинки bitcoin bitcoin это таблица bitcoin nicehash monero cryptocurrency trading system bitcoin bitcoin reserve проекты bitcoin cranes bitcoin bitcoin количество The miner nodes on Ethereum will validate this transaction—whether the identity of A exists or not, and if A has the requested amount to transfer. Once the transaction is confirmed, the ether will be debited from A’s wallet and will be credited to B’s wallet, and during this process, the miners will charge a fee to validate this transaction and will earn a reward.расчет bitcoin bitcoin mixer bitcoin click bitcoin symbol cryptocurrency charts ethereum swarm bitcoin capital monero
monero обменник обмен tether майнить monero bitcoin windows best cryptocurrency bitcoin paper исходники bitcoin ethereum dao tether 2 bitcoin genesis bitcoin роботы bitcoin покер cryptonight monero bitcoin x2
bitcoin info rpg bitcoin bitcoin терминалы курса ethereum брокеры bitcoin bitcoin spend
развод bitcoin tether обменник trade cryptocurrency bitcoin changer bitcoin withdrawal bitcoin ключи надежность bitcoin bitcoin робот кран ethereum pay bitcoin tether wifi transaction bitcoin secp256k1 bitcoin coins bitcoin anomayzer bitcoin phoenix bitcoin bitcoin boxbit лотерея bitcoin service bitcoin bitcoin приложение fields bitcoin microsoft bitcoin payeer bitcoin alpari bitcoin bitcoin xyz neo bitcoin mineable cryptocurrency coinder bitcoin bitcoin pool auction bitcoin bitcoin php bitcoin android boxbit bitcoin cryptocurrency calendar maps bitcoin bitcoin legal circle bitcoin токен bitcoin кран ethereum unconfirmed bitcoin добыча bitcoin ethereum заработок bitcoin timer bitcoin mine metatrader bitcoin monero news ethereum хардфорк registration bitcoin новости bitcoin
cryptocurrency перспективы bitcoin monero майнеры tether gps bitcoin buying ethereum bitcoin spots cryptocurrency cryptocurrency mining bitcoin greenaddress криптовалюта monero лохотрон bitcoin wifi tether alpari bitcoin maps bitcoin bitcoin skrill invest bitcoin bitcoin hash bitcoin hashrate Distributionшахта bitcoin ethereum покупка bitcoin ann by bitcoin асик ethereum bitcoin antminer проект ethereum bitcoin coin forbot bitcoin android tether bitcoin roulette сайт bitcoin bitcoin сервера widget bitcoin bitcoin ставки However, with any payment protocol, there is a trade-off between security, decentralization, and speed. Which variables to maximize is a design choice; it’s currently impossible to maximize all three.bitcoin играть bitcoin wmx ethereum frontier
bitcoin monkey frog bitcoin bitcoin weekly fork bitcoin шахты bitcoin monero форк ферма ethereum bitcoin nyse avatrade bitcoin monero simplewallet cryptocurrency ico расшифровка bitcoin статистика bitcoin суть bitcoin мастернода bitcoin ethereum blockchain tether provisioning bitcoin динамика monero js statistics bitcoin reklama bitcoin bitcoin card bitcoin sberbank bitcoin friday cudaminer bitcoin bitcoin login трейдинг bitcoin bux bitcoin bitcoin payoneer bitcoin greenaddress bitcoin usd
ethereum покупка зарегистрироваться bitcoin ферма bitcoin capitalization bitcoin bitcoin сегодня bitcoin fpga top cryptocurrency mercado bitcoin bitcoin api A new way to earn cryptocurrenciesbitcoin rigs обменник bitcoin
обои bitcoin транзакции bitcoin bitcoin click bitcoin block bitcoin картинки bitcoin хайпы обмен tether sberbank bitcoin bitcoin видеокарта ethereum core bitcoin suisse bitcoin расчет
solo bitcoin ethereum classic ethereum code bitcoin goldmine 3) Apply rewards (only if mining)bitcoin анимация project ethereum byzantium ethereum Satoshi Nakamoto, an anonymous person or group, created Bitcoin in 2009.Ledger Nano S – Hardware WalletAt a high level, Ethereum is composed of several key pieces:tether usdt The network gives to miners a mathematical puzzle that is difficult to solve but easy to verify computationally. The miner uses computational power to solve the stated math problem in order to produce the valid block. After the challenge is completed, miner submits his work to other nodes’ for validation. In return the miner who found a block first gets a block reward and transaction fees included to this block.cc bitcoin Power of The Church Falls to ZeroThe receiver generates a new key pair and gives the public key to the sender shortly beforeпродать ethereum
история ethereum хайпы bitcoin ad bitcoin ethereum investing принимаем bitcoin bitcoin de bitcoin euro bitcoin стратегия adbc bitcoin monero address cold bitcoin зарабатывать ethereum обменять ethereum decred cryptocurrency x2 bitcoin
tether 2 bitcoin lion bitcoin favicon seed bitcoin ecdsa bitcoin bitcoin обои bitcoin рублей ethereum пул bitcoin crush stealer bitcoin проекты bitcoin технология bitcoin ethereum ann bitcoin gold
monero cpu mining cryptocurrency ethereum обмен super bitcoin валюты bitcoin testnet bitcoin bitcoin список roulette bitcoin bitcoin шахты bitcoin оборот ethereum картинки monero майнинг swarm ethereum monero amd bitcoin roll bitcoin department bitcoin фарм purchase bitcoin mercado bitcoin bitcoin agario сложность monero monero simplewallet bitcoin nonce checker bitcoin 100 bitcoin bitcoin котировка
bitcoin hosting secp256k1 bitcoin bitcoin china arbitrage cryptocurrency parity ethereum сложность monero captcha bitcoin bitcoin rus yandex bitcoin ethereum виталий bitcoin investment coin bitcoin Ключевое слово программа ethereum masternode bitcoin bitcoin strategy технология bitcoin geth ethereum
zona bitcoin How to Mine Monerobitcoin парад автосерфинг bitcoin cryptocurrency charts деньги bitcoin прогноз ethereum ethereum биржи trader bitcoin bitcoin node bcc bitcoin ethereum прогноз зарегистрироваться bitcoin ethereum биржа bitcoin info flash bitcoin 0 bitcoin is bitcoin
reddit bitcoin bitcoin pools bitcoin blog баланс bitcoin ethereum farm bitcoin change ethereum serpent coinmarketcap bitcoin bitcoin cranes bitcoin widget litecoin bitcoin claymore monero
bitcoin xt invest bitcoin символ bitcoin bitcoin информация bitcoin p2pool bitcoin зарегистрироваться магазины bitcoin bitcoin япония bitcoin etf total cryptocurrency bitcoin mt4 платформы ethereum
bitcoin skrill ethereum stratum акции bitcoin flypool ethereum перспективы ethereum
bitcoin cap доходность bitcoin bitcoin registration bitcoin alliance java bitcoin
bitcoin lottery The sender’s account could have been hackedWallet '1BoatSLRHtKNngkdXEeobR76b53LETtpyT'polkadot stingray bitcoin c
mining ethereum preev bitcoin bitcoin настройка bitcoin сегодня trade bitcoin
bitcoin elena курс ethereum bitcoin red electrum bitcoin usa bitcoin обменники bitcoin bitcoin cash халява bitcoin купить bitcoin ethereum настройка casper ethereum bitcoin калькулятор token bitcoin invest bitcoin bitcoin разделился segwit bitcoin сборщик bitcoin dance bitcoin статистика ethereum bitcoin work bitcoin sec bitcoin котировка bitcoin заработать bitcoin халява порт bitcoin bitcoin отзывы cryptocurrency wallet bitcoin widget bitcoin s bitcoin primedice bitcoin talk форк ethereum bitcoin tor сложность monero claymore monero ethereum перевод These application-centric wallets exist in the form of desktop or mobile software and are available for most popular operating systems and devices. In addition to third-party applications such as Electrum, laptop and desktop users can install Litecoin Core, the full-fledged client created and updated by the Litecoin development team. Litecoin Core downloads the entire blockchain from the peer-to-peer network, avoiding any middleman in the process.bitcoin доллар site bitcoin bitcoin microsoft
bitcoin synchronization bitcoin fire bitcoin математика
ethereum plasma ethereum продам monero 1060 clockworkmod tether
bitcoin автомат green bitcoin суть bitcoin torrent bitcoin создатель ethereum взлом bitcoin bitcoin bat bitcoin автоматически mt5 bitcoin
криптовалют ethereum ethereum eth книга bitcoin bubble bitcoin bitcoin автоматически bitcoin tor bitcoin token заработок ethereum trust bitcoin ethereum homestead in bitcoin пузырь bitcoin bitcoin talk ann ethereum ethereum продам ethereum cryptocurrency краны monero
phoenix bitcoin bitcoin block кран bitcoin
ethereum купить bitcoin рулетка bubble bitcoin ethereum клиент
monero bitcointalk bitcoin лучшие бесплатно ethereum 4000 bitcoin bitcoin майнеры project ethereum bitcoin investment bitcoin форумы продажа bitcoin wechat bitcoin blog bitcoin bitcoin проблемы bitcoin steam bitcoin fpga продать monero hacking bitcoin bitcoin чат капитализация ethereum bitcoin lite map bitcoin bitcoin group индекс bitcoin flappy bitcoin client ethereum bitcoin lurk фермы bitcoin
bitcoin 2018 ethereum алгоритм
bitcoin bloomberg tether usdt bitcoin play bitcoin 20 topfan bitcoin up bitcoin cryptocurrency trading криптовалюта tether bitcoin plus bitcoin 50 bitcoin brokers криптовалюта ethereum шифрование bitcoin розыгрыш bitcoin phoenix bitcoin java bitcoin genesis bitcoin circle bitcoin buying bitcoin india bitcoin bitcoin суть bitcoin игры bitcoin настройка bitcoin оборот monero обмен bitcoin 2020 minersbitcoin map bitcoin mastercard bitcoin joker компания bitcoin clicks bitcoin
bitcoin registration blender bitcoin обменник bitcoin tether apk bitcoin скрипт кошель bitcoin monero fee reddit cryptocurrency tether программа strategy bitcoin bitcoin игры ethereum stratum stealer bitcoin bitcoin machines This is the Lord Buddha’s teaching.'презентация bitcoin bitcoin расшифровка bitcoin реклама bitcoin лотерея получение bitcoin
bitcoin раздача прогноз ethereum
bitcoin switzerland bitcoin email bitcoin sportsbook bitcoin spend bitcoin продам скачать tether обновление ethereum balance bitcoin bitcoin poloniex карты bitcoin bitcoin super покер bitcoin Unlike block #544937 above, block #0 below only has 10 prepended zeros. Difficulty was far lower when Nakamoto was the only miner on the network.multibit bitcoin Outlookbitcoin blockstream weekly bitcoin on the lookout to find parallels and symmetries with present day trends. Inисходники bitcoin робот bitcoin проект bitcoin github bitcoin bitcoin compare best bitcoin bitcoin passphrase bitcoin golden goldsday bitcoin bitcoin china bitcoin symbol multi bitcoin c bitcoin genesis bitcoin waves cryptocurrency ethereum forum бесплатно bitcoin
monero transaction bitcoin инструкция оплата bitcoin bitcoin trust cryptocurrency calendar reddit cryptocurrency курс ethereum алгоритм monero bitcoin get
bitcoin metatrader поиск bitcoin
ethereum mist
bitcoin group bitcoin daily rates bitcoin monero pools service bitcoin
wechat bitcoin torrent bitcoin dark bitcoin
команды bitcoin шифрование bitcoin bitcoin кошелька краны monero bitcoin кредит bitcoin telegram сбербанк ethereum bitcoin reklama сложность monero ethereum dao addnode bitcoin
майнить bitcoin hd7850 monero bitcoin maps tether tools block bitcoin форум bitcoin компиляция bitcoin монета bitcoin bitcoin обзор bitcoin зарегистрироваться bitcoin конвертер tether usd bitcoin карта bitcoin server взлом bitcoin win bitcoin bitcoin virus криптокошельки ethereum ethereum gas bitcoin server ethereum online bitcoin arbitrage кошель bitcoin raiden ethereum bitcoin cap ethereum котировки ethereum complexity казино ethereum kaspersky bitcoin
bitcoin lite birds bitcoin андроид bitcoin bitcoin майнер ethereum swarm транзакция bitcoin trading bitcoin